Profit Tracker: Packer Margins Eroding

Though still operating with solid profits, beef packer margins have slowly eroded in recent weeks. Last week packers earned $39 per head, $6 less than the previous week. Cattle feeders, however, maintained margins on cattle shipped last week at $227 per head, according to the Sterling Beef Profit Tracker.

The 5-area average Choice steer price last week was $126.20, up $0.23. Costs associated with feeding cattle, however, increased last week as the price of feeder cattle calculated against the fed cattle sales were $147.09, or $3.59 per cwt. higher ($28 per head). The Beef and Pork Profit Trackers are calculated by Sterling Marketing Inc., Vale, Ore.

The cost of finishing a steer last week was calculated at $1,529 per head, which is $108 per head higher than the $1,420 a year ago. A month ago cattle feeders were earning $184 per head, while a year ago profits were calculated at $245 per head. Feeder cattle represent 74% of the cost of finishing a steer, compared to 75% last year.

Farrow-to-finish pork producers saw their margins improve $2 per head to $34. Lean carcass prices traded at $73.80, an increase of $0.75 per cwt. from the previous week. A year ago pork producers earned an average of $31 per head. Pork packer margins eroded $12 per head to land in the red $0.57 per head per head.

Cash prices for fed cattle are $7 per cwt. higher than the same week a year ago. Lean hog prices are about $2 per cwt. higher than last year.

Sterling Marketing president John Nalivka projects cash profit margins for cow-calf producers in 2018 will average $103 per cow. That would be $55 per head less than the estimated average profit of $158 for 2017. Estimated average cow-calf margins were $438 per cow in 2015.

For feedyards, Nalivka projects an average profit of $92 per head in 2018, which would be $144 less than the average of $236 per head in 2017. Nalivka expects packer margins to average about $73 per head in 2018, down from $118 in 2017.

For farrow-to-finish pork producers, Nalivka projects 2018 profit margins will average $13.75 per head, compared to $20.87 in 2017. Pork packers are projected to earn $19 per head in 2018, down slightly from $25 profit per head in 2017.